As part of our Travel Megatrends research, we spoke to Filip Filipov, VP Product Management at Skyscanner, about payments in the travel industry.

The Jet: Payment is often cited as a major pain point for travellers when booking trips online. Are you noticing any trends in improving the user experience, and how is Skyscanner responding?
Filip Filipov: Card abandonment is still a massive problem in travel with typically one in ten online transactions being completed. While Skyscanner doesn’t process any payments, we work with partners to include their purchasing process on our website so that customers can buy directly on the site. By enabling people to remain on the site, we are seeing a 50% improvement in the conversion rate and, in some cases, as much as 300-400%. Easiness of purchase is key in today’s market.
 
It’s not just payments that cause cart abandonment. Travel is a significant purchase and because of price volatility, the concept of a shopping cart that you can return to later doesn’t really exist in travel e-commerce.  While some OTAs don’t permit this, new initiatives are starting to emerge where some airlines are starting to introduce a shopping cart – particularly US carriers – holding a ticket for 72 hours. Technology providers like flyr and Options Away, for example, offer solutions that are able to predict and measure price elacticity on the basis of customer behaviour, seasonality and urgency trends. This way airlines can lock in a purchase, protecting the customer from fare increases and rebooking fees when plans change, while at the same time reducing abandonment and unlocking new revenue streams
 
The Jet: A significant partnership was recently announced by Deutsche Bank and IATA. Is this a growing trend in travel and what is your view on this alliance?
Filip Filipov: There are of course challenges in working with partners but at Skyscanner we have over the past three to four years successfully integrated the purchasing process of 30 partners within our environment. When we started to bring them onto our direct booking platform we had initial difficulties but over time our partners, which include British Airways, have recognised that through what we do, we bring the best experience to our joint customers. And some of them simply don’t have the operational capacity for distribution that we have.
 
IATA helps settle payments between airlines and OTAs but a better system is needed and IATA has interesting initiatives around simplifying this with a payment network for the airline industry. I am supportive of anything that helps airlines improve their margins.

The Jet: What is the future of alternative payments in the travel industry?
Filip Filipov: Our partner agencies and airlines are starting to open up to alternative payments and we’re seeing a tremendous growth in acceptance of PayPal payments. Payment providers are also starting to allow more forms of payment. It may be wishful thinking, but I hope to see more agencies and airlines adopting Apple Pay and Google Pay, enabling customers to complete a transaction very quickly while adding a new layer of fraud protection – it provides the added benefit of paying as a local and not being charged as a foreigner.
 
The new generations do everything on the phone, so the industry will need to respond or face trouble if it doesn’t. Take what certain fintechs are doing to disrupt travel by charging the right rates and eliminating fees and currency conversion. Curve is issuing virtual cards so travellers can use the right local rate while TransferWise is offering a virtual bank account and a card for the country you’re visiting. Apple has just announced 200,000 new merchants that accept that form of payment.
 
The Jet: Why has virtual payments not taken hold?
Filip Filipov: There are interesting solutions out there, but a large airline is unlikely to buy something that is not yet established or widely accepted. Big organisations find it difficult to change because of legacy problems and the way their systems are built for clearing and settlement. This may change over time if the benefits are a lot clearer and how integration will be managed. For a big contract, a clear business case has to be in place and multiple stakeholders convinced.
 
The Jet: What about mobile – why is a market such as China so successful in deploying mobile wallets?  
Filip Filipov: Spurred on by minimum charges to the merchant, immediate payments and the establishment of a truly mobile money ecosystem across the country, China is certainly leading in alternative payments and I believe China, rather than Denmark or Norway, will become the world’s first cashless society. The use of the WeChat Pay messaging service and Alipay is widespread and supported by all banks and most merchants. Chinese tourists travelling abroad do not use credit cards and we’re already seeing a number of companies – most recently Air Canada – accepting WeChat Pay and Alipay outside China. Integration of these wallets is what has driven success in adoption and it’s got to a stage where Baidu and CTrip are forcing the use of these payment methods.
 
The Jet: What is your view of the future of travel?
Filip Filipov: It is definitely about creating a better user experience. Alternative forms of payment to cater for a new demographic forms a big part of what we can expect to see in travel in the future. We will not have credit cards while the concept of credit will still need to be catered for, for example allowing to pay for travel in instalments which is already in place in Brazil and offered to travel companies by solution providers like Klarna who underwrites the risk.
 
Artificial Intelligence (AI) and predictive analytics is obviously a hot topic in tech at the moment, with Google probably the farthest ahead with the Google Plex solution. The industry is starting to use machine learning – a subset of AI – to inform better product decisions, while predictive analytics is widely used for fraud detection.
 
The Jet: How does Skyscanner use marketing and communications to remain competitive in the digital travel landscape?
Filip Filipov: Competitors like Kayak utilise television advertising, rely on user acquisitions and purchasing software companies. Others like Booking.com focus a lot of their spend on Google search and advertising.  With flights operating on razor thin margins, Skyscanner is finding that it has to be smart about driving traffic directly to our website. Firstly, we invest in the tools we need and secondly on our 2,000-strong global partner network, which has been a strong driver of growth for us.

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